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The urban wage premium in imperfect labour markets

Author

Listed:
  • Hirsch, Boris

    (IZA ; Leuphana University of Lüneburg)

  • Jahn, Elke

    (Institute for Employment Research (IAB), Nuremberg, Germany ; IZA ; Univ. Bayreuth)

  • Manning, Alan

    (London School of Economics and Centre for Economic Performance)

  • Oberfichtner, Michael

    (Institute for Employment Research (IAB), Nuremberg, Germany)

Abstract

"Using administrative data for West Germany, this paper investigates whether part of the urban wage premium stems from fierce competition in thick labour markets. We first establish that employers possess less wage-setting power in denser markets. Local differences in wage-setting power predict 1.8 - 2.1% higher wages from a 100 log points increase in population density. We further document that the observed urban wage premium from such an increase drops by 1.5 - 1.9pp once conditioning on local search frictions. Our results therefore suggest that a substantial part of the urban wage premium roots in differential imperfections across local labour markets." (Author's abstract, IAB-Doku) ((en))

Suggested Citation

  • Hirsch, Boris & Jahn, Elke & Manning, Alan & Oberfichtner, Michael, 2019. "The urban wage premium in imperfect labour markets," IAB-Discussion Paper 201921, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    • Handle: RePEc:iab:iabdpa:201921
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    More about this item

    Keywords

    Bundesrepublik Deutschland ; Westdeutschland ; Bevölkerungsdichte ; Einkommenseffekte ; erwerbstätige Männer ; friktionelle Arbeitslosigkeit ; IAB-Betriebs-Historik-Panel ; Integrierte Erwerbsbiografien ; Lohnelastizität ; Lohnhöhe ; Lohnunterschied ; Marktunvollkommenheit ; Monopson ; regionaler Arbeitsmarkt ; Stadt ; 1985-2010;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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